House panel's draft of farm bill cuts $35B

The leaders of the House Agriculture Committee on Thursday releaseda draft 2012 farm bill that cuts direct spending by $35 billion, about $11 billion more than a Senate-passed bill.

The five-year bill would authorize farm subsidies, conservation programs, crop insurance and food stamp spending and is expected to be scored as costing in excess of $900 billion over 10 years.

House Agriculture Chairman Frank Lucas (R-Okla.) and ranking member Collin Peterson (D-Minn.) have both signed off on the bill, which includes much deeper cuts to food stamps than the Senate bill.

The Senate found more than $4 billion in savings from the food stamps program, but the Lucas-Peterson bill gets more than $16 billion, according to the committee. Liberal Senate Democrats tried but failed to remove the Senate cuts.

ADVERTISEMENT

As expected, the extra savings in the food stamps program come largely comes from changes to eligibility rules. It requires that recipients actually receive welfare to automatically qualify and closes a loophole that allows states to sign poor people up for heating assistance in order to qualify them for food stamps.

On farm subsidies, as expected, the farm bill contains added price-based support for Southern rice and peanut farmers, providing an “equitable” subsidy system, in the words of Lucas.

"I'm pleased to release this bipartisan legislation with my friend and colleague Collin Peterson. Our efforts over the past two years have resulted in reform-minded, fiscally responsible policy that is equitable for farmers and ranchers in all regions and will lead to improved program delivery," Lucas said in a release.

Even with the deeper cuts, moving a farm-bill through the fiscally conservative House is likely to be difficult. The House budget called for food stamps to be cut by $134 billion over 10 years by block granting the program entirely to the states.

It is also by no means certain that the bill will come up for a House floor vote. GOP leaders are focused on repealing "ObamaCare," appropriations bills and anti-tax increase measures and are not seen as enthusiastic about voting on a major spending bill.

Deficit hawks are already crying foul about the target price-based system and the inclusion of the expanded crop insurance.

"They are jacking up the target price for each commodity, which is utterly ridiculous," said Steve Ellis of Taxpayers for Common Sense. "Farm businesses have been doing great and raking in the profits for the last several years. So, the House response is to turn around and increases target prices to practically guarantee growers a profit?"

Taxpayers for Common Sense estimates that the cost of the crop insurance program could balloon far beyond committee estimates, erasing any deficit reduction.

Congress must do something by Sept. 30, however, when current farm policy expires.

“Congress needs to complete work on the 2012 Farm Bill before the current bill expires, otherwise we jeopardize one of the economic bright spots of our nation’s fragile economy,” Peterson said in a release. “There will be challenges ahead, but we will pass the bill out of Committee next week and, if the House leadership gets this right and brings the bill to the floor, we will ultimately finish the bill in September.”

Like the Senate bill, the House draft bill finds savings by eliminating direct payments to farmers — a program that has long been criticized since farmers who no longer farm at all can get the payments based on historic production levels.

The bill contains expanded “shallow loss” crop insurance program, as in the Senate bill, but this program has a higher deductibles for farmers to meet. The Senate system is favored by Midwest farmers of corn, wheat and other grains and has been championed by Senate Agriculture ranking member Sen. Pat Roberts (R-Kan.)

In the House version, farmers need to experience a 15 percent loss to meet the deductible, rather than the 10 percent loss in the Senate bill. The House bill has other technical changes to the way risk is measured and losses are calculated in order to reduce costs to the government.

The House version contains a price-based insurance program for farmers, not contained in the Senate bill.

This program has being pushed by lobbyists for rice and peanut farmers, who say they are hurt by the elimination of direct payments and not helped by expanded crop insurance.

The price based system is similar to existing counter-cyclical payments but only kicks in when there are "deep mulit-year price declines," according to the committee.

The House bill contains more generous target prices for rice and peanuts than a failed compromise proposal worked out between Sen. Kent Conrad (D-N.D.) and Sen. Saxby Chambliss (R-Ga.) before the Senate passed its bill. The Conrad proposal had prices floors of $11 per hundredweight for rice and $25.25 for peanuts. The House bill sets the prices at $14.40 and $26.75, respectively. The higher the target prices, the less risk producers face.

The House bill specifies that farmers will have one chance to choose whether to go with the shallow loss crop insurance or the price-based system.

Cotton is an exception, as the commodity gets its own revenue-based program, similar to the Senate bill. Cotton's current price-based system was challenged successfully in the World Trade Organization and the U.S. is currently paying a penalty to Brazil that it uses to help its cotton farmers. The new program is an attempt to end this.

As expected, the bill does not curtail the price-support quota system for sugar imports. Rep. Bob Goodlatte (R-Va.) is expected to offer an amendment, supported by sugar users, to end the program during next week's committee markup.

As expected, the bill cuts environmental conservation programs by
roughly the same amount, $6.4 billion, as the Senate bill. It does so by
combining 23 programs into 13.

The committee plans to mark up the bill over three days, starting July 11.